Wealthyvia Checklist - Thread
1/n
Focus on 5 Growth areas - Sales, Volume, Profits, Margins, Market Share.
1/n
Focus on 5 Growth areas - Sales, Volume, Profits, Margins, Market Share.
2/n
Should be on Top 3 players in its respective market.
If not, is the company capturing market share from the incumbents with the launch of unique or niche products, entering new markets, new brands, patents etc ?
Is the company Asset light or Asset heavy ?
Should be on Top 3 players in its respective market.
If not, is the company capturing market share from the incumbents with the launch of unique or niche products, entering new markets, new brands, patents etc ?
Is the company Asset light or Asset heavy ?
3/n
History of Equity dilution ? Is the company a frequent dilutor of equity ?
Will the future growth come from Debt, Equity dilution or both ?
And how does it change the leverage position of the company ?
History of Equity dilution ? Is the company a frequent dilutor of equity ?
Will the future growth come from Debt, Equity dilution or both ?
And how does it change the leverage position of the company ?
4/n
Minimum Govt interference.
Can the company shift the burden to customers ?
On the other hand, if the company get benefits from the govt, how sustainable is it ?
Is it one off events like anti-dumping duty or a long term change like benefiting low income housing loans.
Minimum Govt interference.
Can the company shift the burden to customers ?
On the other hand, if the company get benefits from the govt, how sustainable is it ?
Is it one off events like anti-dumping duty or a long term change like benefiting low income housing loans.
5/n
Is the size of the industry is large or small? Is it saturated or growing.
A smallcap which is a market leader in its niche segment with honest management is on its way of being a multibagger.
Is the size of the industry is large or small? Is it saturated or growing.
A smallcap which is a market leader in its niche segment with honest management is on its way of being a multibagger.
6/n
Management compensation as % of Net Profit. Is it linked to performance or flat structure ? Is it in par with the competitors ?
Is the company professional managed or Owners Managed ?
Key man risk ?
Management compensation as % of Net Profit. Is it linked to performance or flat structure ? Is it in par with the competitors ?
Is the company professional managed or Owners Managed ?
Key man risk ?
7/n
Its true that not every honest management is hunger for growth. There are many examples whose managements are very honest but they are not in growth race.
Where does this management fits in ?
Its true that not every honest management is hunger for growth. There are many examples whose managements are very honest but they are not in growth race.
Where does this management fits in ?
8/n
Its a challenge for a Debt free company with a decent management to go bankrupt.
Hence we prefer debt free companies. But we do consider D/E of less than 0.4 with Interest Coverage ratio of well above 3.
Its a challenge for a Debt free company with a decent management to go bankrupt.
Hence we prefer debt free companies. But we do consider D/E of less than 0.4 with Interest Coverage ratio of well above 3.
9/n
Growth coming back to Quality is a deadly combination.
Example: Bata, Jubilant Foods, Nestle, Titan
Watchout for the management changes OR growth triggers in Quality companies.
Growth coming back to Quality is a deadly combination.
Example: Bata, Jubilant Foods, Nestle, Titan
Watchout for the management changes OR growth triggers in Quality companies.
10/n
How management handles Free Cash Flows ? Give back as dividends, Continues Capex, Diversification, Acqusitions ?
Government can privatize PSUs. But can't privatize the Babus culture.
How management handles Free Cash Flows ? Give back as dividends, Continues Capex, Diversification, Acqusitions ?
Government can privatize PSUs. But can't privatize the Babus culture.
11/n
What is driving the growth ?
Innovation, New geographies, New Products, Distribution, Cross selling ?
More importance of Revenue growth over PAT growth. PAT growth can be obtained internally, but Revenue growth has to come from external sources.
What is driving the growth ?
Innovation, New geographies, New Products, Distribution, Cross selling ?
More importance of Revenue growth over PAT growth. PAT growth can be obtained internally, but Revenue growth has to come from external sources.
12/n
Track record of revenue growth over the last 3,5,7,10 years period ?
Is last 5Y sales CAGR > 10Y sales CAGR ?
What is the catalyst ? Same with PAT growth as well.
Track record of revenue growth over the last 3,5,7,10 years period ?
Is last 5Y sales CAGR > 10Y sales CAGR ?
What is the catalyst ? Same with PAT growth as well.
13/n
Practicability of the management guidance.
What are the hurdles in the growth trajectory ?
Probabilistic approach.
Feasability:
- Constraint of Net block / fixed assets
- Management capabilities
- Cash in hands
- Demand for sales
What can go wrong in the plan ?
Practicability of the management guidance.
What are the hurdles in the growth trajectory ?
Probabilistic approach.
Feasability:
- Constraint of Net block / fixed assets
- Management capabilities
- Cash in hands
- Demand for sales
What can go wrong in the plan ?
14/n
Have a look at
- Tax evasions,
- Dividend track record,
- High Promoter holding,
- Pledge,
- Related party transactions,
- Too many subsidiaries,
- CFO & PAT comparision historical trend.
Have a look at
- Tax evasions,
- Dividend track record,
- High Promoter holding,
- Pledge,
- Related party transactions,
- Too many subsidiaries,
- CFO & PAT comparision historical trend.
15/n
Where doesn your company fits into:
Great Mgmt + Great Sector
Great Mgmt + Cyclical / Dying Sector
Doubtful Mgmt + Great Sector
Doubtful Mgmt + Cyclical / Dying Sector
Once can make money on all 4, but high chances of giving it all back & a little more in the last 3.
Where doesn your company fits into:
Great Mgmt + Great Sector
Great Mgmt + Cyclical / Dying Sector
Doubtful Mgmt + Great Sector
Doubtful Mgmt + Cyclical / Dying Sector
Once can make money on all 4, but high chances of giving it all back & a little more in the last 3.
16/n
Is Margins expanding & Why ?
- Low Raw material costs (not sustainable)
- Operating Leverage (sustainable)
- Financial Leverage (sustainable)
- New High margin product launches (sustainable)
Is Margins expanding & Why ?
- Low Raw material costs (not sustainable)
- Operating Leverage (sustainable)
- Financial Leverage (sustainable)
- New High margin product launches (sustainable)
17/n
Risk Management more of an Art than a Science.
It is easy to quantify risk using mathematical model. But we can't ignore the power of human heartbeat when we actually face it.
Risk is a fate rather than a choice.
Without numbers, risk is a matter of Gut.
Risk Management more of an Art than a Science.
It is easy to quantify risk using mathematical model. But we can't ignore the power of human heartbeat when we actually face it.
Risk is a fate rather than a choice.
Without numbers, risk is a matter of Gut.
18/n
The greatest advantage of gambling comes from not playing it.
Its sometimes hard to find a cause where there seems to be none. Market Gurus understand it the least.
Risk per unit of Stress - An important concept to be internalized while selecting a company.
The greatest advantage of gambling comes from not playing it.
Its sometimes hard to find a cause where there seems to be none. Market Gurus understand it the least.
Risk per unit of Stress - An important concept to be internalized while selecting a company.
19/n
More often than not, Averaging Up is a good Risk Management strategy than Averaging down.
No investment stretegy can explain buying DHFL / Manpasand now as they are still trading, other than being plain stupid or being a self proclaimed punter or both.
More often than not, Averaging Up is a good Risk Management strategy than Averaging down.
No investment stretegy can explain buying DHFL / Manpasand now as they are still trading, other than being plain stupid or being a self proclaimed punter or both.
20/n
Is the company enjoying any Tax shield, Deffered Tax Laibility or Deffered Tax Asset or operating from a SEZ ?
Trend in Debtor days, Creditor days, Inventory period, Asset turnover.
Is the company enjoying any Tax shield, Deffered Tax Laibility or Deffered Tax Asset or operating from a SEZ ?
Trend in Debtor days, Creditor days, Inventory period, Asset turnover.
21/n
Is the company running on positive or negative working capital ? If Receivables as % of Total Revenue > 40% - it is a Big Red flag.
High Debt, High Receivables, Low Marin business - A Ticking Time Bomb.
Is the comp funding dividends via Debt ? Best example - Tata Motors
Is the company running on positive or negative working capital ? If Receivables as % of Total Revenue > 40% - it is a Big Red flag.
High Debt, High Receivables, Low Marin business - A Ticking Time Bomb.
Is the comp funding dividends via Debt ? Best example - Tata Motors
22/n
Nothing can be more important than ROE. But at the same time ROE is not so relevant for cyclical businesses and holdings companies.
Dupoint Analysis to find triggers in Return on Equity:
wealthyvia.com/blog/demystify…
Nothing can be more important than ROE. But at the same time ROE is not so relevant for cyclical businesses and holdings companies.
Dupoint Analysis to find triggers in Return on Equity:
wealthyvia.com/blog/demystify…
23/n
Is the Return on Captial more than Cost of Capital ?
Asset turnover ratio should be looked in accordance with PAT Margins.
Is the Return on Captial more than Cost of Capital ?
Asset turnover ratio should be looked in accordance with PAT Margins.
24/n
A low margin business but with high asset turn is better than a high margin business with a low asset turn. Because in later case most of the capital is get locked up in Receivables, Fixed assets, Inventory etc.
A low margin business but with high asset turn is better than a high margin business with a low asset turn. Because in later case most of the capital is get locked up in Receivables, Fixed assets, Inventory etc.
25/n
These are few points which we look out when we start analyzing a company.
Checkout out our performance of Smallcase here:
arthavruddhi.smallcase.com
These are few points which we look out when we start analyzing a company.
Checkout out our performance of Smallcase here:
arthavruddhi.smallcase.com
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